Tata Consultancy Services Ltd (TCS), India’s largest information technology services provider, told analysts on Friday that its June quarter earnings in rupee terms and operating margins would feel the impact of the domestic currency’s appreciation and wage increases.

The company’s first quarter rupee earnings may decline by 300 basis points (bps) because of the rupee’s rise and its Ebit (earnings before interest and tax) margin may be affected to the tune of 100 bps, chief financial officer Rajesh Gopinath said at an analyst briefing in Mumbai.

A basis point is one-hundredth of a percentage point. In dollar terms, the rupee appreciation will help TCS by 50 bps, Gopinath said, adding that annual salary increments, too, would have an impact on fiscal first quarter margins in line with previous years. From 1 April till date, the rupee has risen 0.2% from 59.89 to 59.7725, according to Bloomberg data.

“We see headwinds of wage hikes and rupee appreciation, impacting the first quarter earnings,” said Shashi Bhushan, an analyst at brokerage firm Prabhudas Lilladher Pvt. Ltd. “Still, overall, we believe Q1 (April-June) will be a much better quarter than Q4 (January-March), and we estimate a rise in dollar revenue growth of as much as 5% in Q1.”

In the quarter ended 31 March, dollar revenue at TCS grew a mere 1.9% to $3,503 million, lower than analysts’ estimate of 2.5%. According to Gopinath, TCS is also facing a one-time impact under accounting regulations that would amount to an additional charge “of about 2% on fixed assets and write-back of 4-5% of fixed assets, respectively”.

He added that the depreciation policy was being amended to reflect current regulations. Gopinath insisted that there was no change in the revenue outlook for the current fiscal year. TCS said earlier it expects to beat software lobby group Nasscom’s projection of 13-15% revenue growth for the industry this fiscal year.

Europe continues to drive growth, while India continues to remain flat, he added. In the last quarter, the company’s India revenue growth was flat at 0.3%. TCS shares fell 0.8% to Rs.2,214.70 each on a day BSE’s benchmark Sensex lost 1.36% to close at 25,228.17 points.